The Kurdistan Regional Government (KRG) in Iraq has sounded an upbeat note, saying oil exports surged through the first week of this month.
The KRG said it remains on track to reach its goal of exporting 1 million barrels per day (bpd) by the end of next year.
However, it committed to paying only a small amount of the money it owes to foreign oil companies, as it continues to face logistical and political obstacles before it can achieve its oil export goals.
The KRG oil ministry said late on Friday that daily flow rates through the Kurdistan crude pipeline to Turkey were nearly 300,000 bpd in the first week in November, up by 60 per cent from average daily rates in the previous four months.
The ministry offered thanks to the companies that have helped it maintain production, even in the face of setbacks due to insurgency as well as legal action by the Iraq central government aimed at stalling its oil exports.
“In these difficult times for the Kurdistan Region of Iraq, the KRG is grateful for the support received from our contractors, who continue to stand behind the people of Kurdistan,” the ministry said.
Companies active in the region saw their shares post sharp gains after Friday's statement. London-listed Genel Energy's shares rose 3.7 per cent to 754 pence, while Gulf Keystone gained 13.2 per cent to 75p. In Norway, DNO, which is part-owned by RAK Petroleum, rose by nearly 8 per cent from the start of the week to 17.22 Norwegian krone. Other companies operating in Kurdistan include Abu Dhabi's Taqa and Dana Gas, headquartered in Sharjah.
The KRG oil ministry said it plans to increase exports aggressively, to 500,000 bpd by the end of the first quarter of next year. The ministry said a total of 34.5 million barrels of oil have been exported since the beginning of the year, with most (21.5m barrels) sold through Turkey’s Mediterranean port of Ceyhan, and the balance transported by lorry to Mersin in Turkey.
The KRG said the total value of oil exported since January was US$2.87 billion, although net cash was $1.7bn after deducting expenses and receipt of oil products as payment-in-kind (for example, kerosene and diesel).
The KRG said it will pay an initial $75m to companies this month, with further payments to follow “on a regular basis”. But that is just a fraction of the total cash owed to companies. Gulf Keystone alone is owed about $250m, according John Gerstenlauer, the company’s chief financial officer. All of the operators in the region have further investments that need to be made to achieve production goals and DNO recently said it was progressing more slowly than expected, partly due to the evacuation of workers because of the violence in the area.
The KRG has pressing considerations other than oil company payments, as its statement made clear: “These revenues are helping the region survive the serious challenges to its continued welfare and stability — the vital fight against ISIS terrorists, the unprecedented influx of refugees and [displaced persons] and the economic sanctions imposed by Baghdad.”
The KRG maintains it has a constitutional right to market its oil independently, especially as Baghdad has built up huge arrears owed to the regional government. The central government, on the other hand, is pursuing legal action in the United States and Greece aimed at blocking KRG oil exports to exert its control over the way oil from the country as a whole is marketed. Talks are under way with the new central government, under the prime minister Haider Al Abadi, to resolve these issues.
amcauley@thenational.ae
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